This document discusses the high failure rate of mergers and acquisitions and identifies reasons for failed transactions. It notes that 55-77% of deals fail to meet strategic and financial objectives. Post-acquisition integration is identified as the number one reason for failure, with most integrations starting too late and being underfunded. The document provides best practices for integration planning, change management, and executive incentive structures to increase the likelihood of deal success.

1. This Dog Won’t Hunt Examining the Mystery of M&A Transaction Failure To play these slides, select “Slide Show” – “View Show” from your Windows menu To hear the narratives, turn your speakers ON

2. The M&A Reality “ The same sad story plays out time and time again in the aftermath of large-and small scale corporate mergers. …some 55 percent to 77 percent of completed M&As fail to meet the strategic and fiscal objectives that initially justified the deal.” BearingPoint Institute “ In the one-year period after a “successful” merger, the average return for combined companies was 25 percent below their peers in the same industry. After 24 months, 80 percent of these new entities were still showing negative results” Business Week “… more than 50% of acquisitions reduce shareholder value or fail to meet expectations. Big deals with more complicated businesses are even less forgiving, and tend to yield twice as many losers as winners” Ernst & Young “ The perception gap is wide – 93 percent of companies interviewed believed that their deal enhanced value, and over one third said that they would not do anything differently on their next deal. …objective assessment of whether deals enhanced or reduced value, showed that only 31 percent of these deals enhanced value.” KPMG International Key Learning: A poor post close integration phase is the #1 reason behind transaction failure.

3. Planning and Analysis Key Learning: Most integration efforts are too little and start too late.

4. Staff Devoted to Integration Key Learning: Integrations are typically done by people who are not trained nor expert at integration.

5. Integration Challenges Interesting Fact: Contrary to popular belief, “Cultural Incompatibility” is rarely the main cause of post deal failure.

6. Control of Key Issues Key Learning: More than half of all transactions are under estimated and under funded.

7. Value Driver Analysis Best Practice: Build Executive consensus with a Value Driver Analysis and update the analysis periodically.

8. Integration Options Integration Time >> Shareholder Value >> - Status Quo - Bolt On Adopt & Go Green Field Best Practice: An Adopt & Go or Green Field integration are best for obtaining better shareholder value in the long term

9. Executive Incentive Plans Best Practice: Use the results of the Value Driver Analysis to set performance measures for leaders.

10. Communications Matrix Best Practice: No Secrets, No Surprises, No Hype, No Empty Promises

11. Integration Approach TECHNOLOGY PROCESS SPACE PLAN PEOPLE Best Practice: Start with process definition which will in-turn drive the form of the 3 enablers.

13. Speed in Transition Memorable Quote: “If I had to do it over again, I would have done it faster.” William Zuendt, President Wells Fargo Bank commenting on their take over of First Interstate Bancorp.